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May 8, 2008 10:51 pm

Hynix to buy 10% stake in rival ProMOS

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Hynix Semiconductor, the world’s second-largest memory chipmaker, said on Thursday it planned to buy up to 10 per cent of ProMOS Technologies to expand its strategic partnership with the Taiwanese rival.

The investment will provide ProMOS with much-needed cash for new investment, while strengthening Hynix’s position in the dynamic random access memory, or D-ram, market.

The tie-up comes amid growing calls for consolidation in the industry, which is undergoing one of its worst downturns because of overcapacity.

Sharp price declines have led to most Asian chipmakers suffering losses in the first quarter, with Hynix reporting a Won675bn ($649m) loss and ProMOS posting a record loss of NT$8.1bn ($263m).

Under the terms of the deal, the South Korean chipmaker plans to license its advanced 50 nanometre-class D-ram processing technology to ProMOS. ProMOS will supply D-ram products produced with such technology to Hynix.

“Hynix plans to co-operate with some financial investors to buy 8-10 per cent portion of shares in ProMOS through private placement to strengthen their long-term co-operation relationship,” said Hynix.

The 10 per cent stake is valued at about NT$5.55bn based on ProMOS’s closing stock price on Wednesday. ProMOS shares rose 2.1 per cent to NT$8.44 while Hynix shares closed up 2.83 per cent at Won29,100 on Thursday.

Hynix and ProMOS have been strategic partners since January 2005, with Hynix providing technology and ProMOS manufacturing D-ram chips for the South Korean company.

The extended partnership will allow Hynix to speed up its technology transfer to ProMOS, which at present uses Hynix’s less-advanced 80-nanometre chip technologies. Hynix plans to appoint a director to ProMOS’s board.

ProMOS had been talking to Hynix and Japan’s Elpida for a stake sale after reporting four straight quarters of losses. The group had NT$5.66bn in cash and cash equivalents at the end of March, down sharply from NT$21.96bn a year ago.

The stake purchase will allow Hynix to secure additional capacity of 60,000-70,000 wafers a month, without building additional production lines on its own.

Hynix has cut this year’s capital expenditure by Won1,000bn to Won2,600bn because of continued oversupply.

Hynix said the deal would help it save Won3,000bn in costs. The company controls about 18.6 per cent of the D-ram market while ProMos has a 2.8 per cent market share, according to researcher iSuppli.

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